The Association of Member Directed Pension Schemes (AMPS) has warned the Competition Commission and the Office of Fair Trading that Financial Services Authority (FSA) capital adequacy plans may threaten competition in the self-invested personal pension (SIPP) industry.
The FSA has said 75 SIPP providers will be affected by the proposed capital adequacy regime with an estimated 14-18% of these firms likely to exit the market.
Letters sent by AMPS chairman Andrew Roberts said "we are naturally concerned that a dozen of our member firms could be forced to close their business involuntarily because of a new regulatory regime that favours larger providers".
The letters stated this would affect small firm's ability to take on new business and would reduce choice for consumers.
Speaking to Retirement Planner, Roberts said: "A common theme [among small providers] is their customers like personal interaction. You've got a named contact. They would lose that if they have to go to a larger provider. Typically smaller SIPP companies have gone against insurance company approaches. They would view going to a larger SIPP provider as too close to being looked after by an insurer.
"There's no evidence to suggest the ones who exit (the market) will be the bad ones. A number of SIPP providers I've spoken to are considered to be well-run and look after a good client base. They've said there's so much interference, it's worn them down and they want to leave.
"It's not that they're badly run and they want to leave anyway. Continuing intervention from the FSA has been chipping them away at various points.
"It might only be directed at a few bad providers but everyone hears the message and the increased costs of capital adequacy."
He continued: "We've got evidence that people leaving might be well-run, not just those poorly run. Reducing competition by [around] 20%, we're not sure it's enough for the consumer. It might mean you won't be able to find an operator with less than 300 SIPPs and you might want that local firm if you're investing in local property."
CEO labels whistle-blower as 'brave'
Adds up to £130m FUM
Our weekly heads-up for advisers
Think tank report
Envisaged by John Cridland